Should Apple tackle the watch industry or television next? If you look at the profit potential, it looks like the iWatch wins out.
Gross margins on watches are around 60 percent, four times bigger than margins on televisions, according to Bloomberg analyst Anand Srinivasan. So even though the global watch industry is smaller than the TV market — $60 billion in revenues during 2013, compared to TV’s $119 billion — focusing on a smart watch would be far more lucrative for Apple.
“This can be a $6 billion opportunity for Apple, with plenty of opportunity for upside if they create something totally new like they did with the iPod — something consumers didn’t even know they needed,” Citigroup analyst Oliver Chen told Bloomberg.
Chen estimates that a 10 percent share for Apple in the watch market would lead to a gross profit of $3.6 billion, while it would only lead to a $1.79 billion profit in televisions.
The biggest Apple rumor at the moment centers on a smartwatch, dubbed the iWatch by gadget geeks, that would communicate with your smartphone. But over the past few years, we’ve also heard plenty of speculation about an Apple television.
Both markets could use Apple’s innovation, but I never quite bought the Apple television talk. Consumers don’t buy televisions very often, Apple already has a viable living room option with the $99 Apple TV, and the television market is even tough for industry giants like Sony. On the other hand, an iWatch would help Apple stake a claim in the burgeoning wearable computing world, and it could tie consumers even more into the iPhone and iPad.
Now with these profit figures, it makes even less sense for Apple to step into televisions. Bring on the iWatch.
Photo: Ruben Schade/Flickr
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